What the Expedia-Travelocity Deal Says About Online Travel
Big online travel agents get more bang for their buck by acquiring small competitors
Last week, Expedia Inc. (NASDAQ:EXPE) announced it was acquiring competing travel-booking site Travelocity from current owner, Sabre Corp. (NASDAQ:SABR), for $280 million in cash. It’s only one in a long list of assimilations that Tripadvisor Inc. (NASDAQ:TRIP), Priceline Group Inc. (NASDAQ:PCLN) and Expedia have made within the online travel agency space over the past couple of years.
In fact, given the sheer number of such announcements investors have heard from Expedia and its peers since 2012, it’s almost tough to believe there are any competing online booking companies left to purchase. But there are, and a closer look at some key numbers suggests we’ve only scratched the surface of the industry’s consolidation.
Moreover, a closer look at some key numbers also reveals Expedia, Priceline and Tripadvisor would be crazy to not remain in M&A mode.
What Expedia is Really Getting With Travelocity
The integration of ravelocity into the Expedia family won’t be a tough one. EXPE already provides the booking backbone for Travelocity (which owns Hotels.com, Hotwire and Trivago), and has already said it has no intention of changing anything about the site from the customer’s point of view.
EXPE boasts a market cap of $11.1 billion and has generated $5.5 billion in revenue over the prior four quarters. It generated net income of $427 million during that timeframe as well. What, pray tell, is the company getting with Travelocity that’s worth its time, trouble and only $280 million?